Prediction Number 3: Facebook gets its groove back, but is not the number one in 2011

For Facebook and social games, 2010 was a good, not a great, year. Facebook became the pre-dominant distribution channel for games worldwide with 40%+ of its 500 million users (I actually thought it was 700 million but am going with their stats) playing games and social game companies such as Playdom selling to Disney for $700 million and Zynga on the path to generate $1 billion on revenues based mostly on Facebook distribution.

Yet, Facebook arbitrarily changed its notification rules many times over the year bringing uncertainty to the market and drove many social game companies to the brink of bankruptcy (note: if Zynga or Playdom buys you for next to nothing because you were about to go out of business, you are lucky, not a genius).

In 2011, I predict that Facebook will get its groove back and become a dominant place to play and make money on games worldwide. However, it will not be the number one distribution game channel in the world.

The reason I am hopeful for Facebook to become a successful gaming platform is that after its many missteps, it is starting to make all the right moves again. With its recent hiring announcements, Facebook is adding grown-ups with real games experience to its management team. It continues to grow globally in markets formally untouched by the games industry such as Indonesia, Philippines, and Turkey that will soon provide a user base of over 1 billion potential users to offer games to. Finally, Facebook seems to get that if it improves its games channel experience, it can make more money in both advertising and micro-transactions. Currently, a lot of money is being left on the table.

A poster child for Facebook’s continual viability as a leading distribution channel is Zynga’s CityVille, which recently grew larger than Farmville to become the biggest and fastest growing game in Facebook’s and also video game history. CityVille could not grow as fast as it did without Facebook (food for thought as Zynga prepares to launch its own games network and expand to other channels). Though Facebook has cut down on virality this year, it has added enough viral features recently to help CityVille grow as fast as it did over the past month.

CityVille, however, is also a poster child of what is wrong with Facebook today. Anyone who thinks that CityVille is proof that Facebook and the social games market is not broken is disillusioned.

For all the explanations about why CityVille is successful (it was launched by Zynga after a year of development with no bugs, Zynga is taking advantage of Facebook’s viral channels that exist, Zynga is cross-promoting with its existing games, Zynga is emailing updates to it multi-million user list, etc), the elephant in the room is that only one company in the world has the scale to make this happen: Zynga.

My take-away from CityVille is that if you have $1 billion in the bank, millions of dollars to spend on one game, a support staff of 1300 people and growing, a user base of 400 million users to cross-promote to, an advertising budget where you could spend millions of dollars per week per game if you wanted to, and an email system as sophisticated as that of Facebook’s, yes, you can create a CityVille-like success. If not, good luck and good night.

Facebook’s goal this year must be to enable CityVille like successes to companies without the massive scale of Zynga which is. . . everyone else.

I think Facebook is on the right path and will create a viable eco-system for more than one game company (or two or three) to make money on Facebook. But, until they do, they will not be the first distribution platform game companies go to develop games for.

So, prediction #3 for the week: Facebook becomes the number two best game platform to play and make money on games in the world. But it will not be number one. We may have to wait until 2012 for that.

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